Analyst forecasts iPhone 3GS will soon be free

In an investors note, RBC Capital Market analyst Mike Abramsky indicated that he expects Apple will soon offer the iPhone 3GS for free—or rather, for $0 with a qualifying service contact.

Abramsky believes the free iPhone 3GS will form the a new entry-level tier in Apple’s iPhone product line, and will likely appear whenever Apple reveals a successor to the iPhone 4. Abramsky does not expect the iPhone 4 to go away: rather, it will occupy a middle position in an iPhone product line, with Apple’s still-unannounced iPhone 4 successor in the top slot. Abramsky believes the broadened iPhone product line will be Apple’s move to “target mid-market smartphone buyers” and ratchet up competition with Google’s Android platform, which is currently the top-selling smartphone platform in the U.S. market. Abramsky forecast a free iPhone 3GS could expand the iPhone’s worldwide marketshare from some 64 million users to more than 150 million users.

As part of its research, RBC hired ChangeWave to conduct a survey of 1,500 consumers; the survey found 14 percent of respondents would be very or somewhat likely to purchase an iPhone 3GS for free with a two-year service contract. Some 13 percent expressed a similar level of interest in the iPad, and only 9 percent for the original iPhone.

Although the iPhone 3GS is currently available for $50 from AT&T in the United States with a two year contract, the investors note reasons that a “free” iPhone 3GS will be far more tempting to consumers, if only a tiny bit cheaper for them over the course of their service contract.

The iPhone 3GS was launched in the United States over two years ago, in June 2009.

Apple has not announced when it plans to launch a follow-up to the iPhone 4.